EconoMeter: Can DeMaio's plan balance budget?

Yes 59% (271)

No 35% (163)

Maybe 6% (27)

461 total votes.

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This week's question: With many tax increases rejected by voters, San Diego County cities, as well as states, counties and school districts, face chronic budget deficits in 2011. San Diego Councilman Carl DeMaio has issued his proposal to balance the budget, largely by contracting city services to private firms, offering incentives for lower pension benefits, and freezing pay. The underlying philosophy is that we’re not taxing too little but spending too much. Others believe San Diego is a “cheap” city that is not taxing or spending at the levels of other comparable cities. Is Carl DeMaio’s “Roadmap to Recovery” a viable approach to balancing budgets?

Gary London

Gary London, The London Group

Answer: Yes

He focuses on pension reforms, which simply must be addressed to solve the fiscal crisis. It is important that DeMaio’s ideas get fully vetted and that the good ones are accepted. I like how he engages in “out of the box” thinking. Prop D did not win because voters were reluctant to solve problems by raising revenue; nor did they think that the cuts went far enough. I hope that DeMaio persuades fellow Councilmembers to adopt a plan that is both viable and creative. My sense is that short of radical reform, all else is merely a “Band-Aid” approach, which allows the fiscal situation to fester, yet doesn’t apply the best medicine to cure the problem. All interests need to get back to the table and renegotiate old deals, beginning with reforming existing pension obligations, and then widening to other structural reforms such as outsourcing services to private companies on a much larger scale. I had always thought that this was a “cheap” town with regard to the electorate’s reluctance to step up and pay for better government. Like a lot of people, in retrospect, the historical mismanagement of government, coupled with the complete lack of perspective on the part of key interest groups, set the stage for the present crisis. If we are to really be America's finest city, our city government has readjust to a lower operating base, just as most businesses have.

Lynn Reaser

Lynn Reaser, Point Loma Nazarene University

Answer: Yes

While certainly not perfect and subject to union negotiations, Councilman DeMaio’s blueprint is a good starting point. (1) Pension reform is critical. Proposals to have public employees share in the costs and risks, as well as the benefits, of retirement programs would embrace practices long endorsed in the private sector. (2) Cost/benefit analysis needs to be applied to all government programs. If the private sector can provided certain goods and services more efficiently, those options should be adopted. (3) Public employees need to have their interests aligned with those of taxpayers. Awarding city employees bonuses based on the achievement of cost-saving goals will help economic incentives start us down the right track.

Marney Cox

Marney Cox, San Diego Association of Governments

Answer: Yes

One alternative, Proposition D was recently rejected by city voters, doing nothing is not an option, and now Councilman DeMaio, who campaigned against Proposition D, has proposed a plan. The DeMaio camp has done extensive background work on the plan to ensure its technical, procedural and legal viability. Can the plan be made more viable? Maybe. As an economist, I would argue for more choices and flexibility to improve the plans viability and achieve the same outcomes. Choices provide alternatives to city employees to choose an option that best fits their circumstance. Flexibility rather than fixed requirements for five years would provide the mayor and city council with management opportunities in case the “plan” does not work as envisioned.

Kelly Cunningham

Kelly Cunningham, National University System

Answer: Yes and No

Among the many budget problems addressed, the councilman’s “Roadmap” lays the groundwork for reforming the biggest shortfall overwhelming the city’s budget, skyrocketing unfunded debt service of the pension system.

Restructuring and reducing net liabilities as recommended by professional budget and actuarial firm evaluations will legally and effectively address these issues threatening to overwhelm general fund revenues.

What the plan does not address is examining the city’s core competencies and continuing to run services that could more effectively be handled by private efforts, such as the airport, convention center, golf courses, and sports stadiums.

Alan Gin

Alan Gin, University of San Diego

Answer: No

Many of the reforms Councilman DeMaio proposes will help and should be implemented. He also correctly identifies pension costs as the main driver of the deficit the city faces.

What I think is problematic is that his plan calls for city employees to voluntarily vote (through Charter Section 143.1) to implement some of the reforms. I don't think this will happen, even given the incentives proposed.

The city might declare an impasse and try to impose the reforms, but that might set off a legal battle whose outcome is uncertain.

Dan Seiver

Dan Seiver, San Diego State University

Answer: Yes

The biggest reforms will have to be in pensions, and the DeMaio plan attacks the problem directly. San Diego, like other cities and states facing pension disaster, will have to transition employees into defined-contribution (DC) rather than defined-benefit (DB) plans. The private sector has already shifted from DB plans to DC plans. Employees who stay on DB will have to accept lower benefits. These changes are in the DeMaio plan. Retiree health costs could also bankrupt many cities and states, and again the DeMaio plan has good proposals to reduce costs in San Diego. At the same time, the city's infrastructure is crumbling, and we must spend more to repair roads, bridges, water lines, etc. Perhaps the "infrastructure reserve" will be used for this purpose. "Reorganization" savings will probably be much more elusive than DeMaio claims, and probably result in significant and painful service cuts, perhaps more than San Diegans can accept.

Norm Miller

Norm Miller, CoStar Group

Answer: Yes

I hate saying “yes” to something which I have not studied in detail, but privatization has worked well in other cities that could over power union opposition and pension reforms are critically needed along with some spending cuts. As long as there are reasonable exception rules, this plan seems like the right direction.

Consolidating some city departments to reduce admin overhead would help. In the short run selling off excess real estate (every city has some), and selling off fee generating services, like parking fees, also helps, but pension reforms are essential to long run solvency.

James Hamilton

James Hamilton, University of California San Diego:

Answer: Yes

The handling of pensions for city employees has been an outrage, and a very aggressive program to stop the bleeding has to begin now. And from a pragmatic perspective, with the defeat of Proposition D, there is no alternative but to look seriously at deep budget cuts.